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13-Jan-2020 9:45 AM

Fourth Quarter Investor Relations Update January 10, 2020

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General Overview

  • Fleet and operation - On March 13, 2019, a directive from the Federal Aviation Administration (FAA) grounded all U.S.-registered Boeing 737 MAX aircraft. The American Airlines fleet currently includes 24 Boeing 737 MAX 8 aircraft with an additional 76 aircraft on order. As previously disclosed, the company has now cancelled all 737 MAX 8 flying through April 6, 2020.

    The company has reached a confidential agreement with Boeing on compensation for financial damages incurred in 2019 due to the grounding of the 737 MAX 8 aircraft. The company currently does not expect any material financial impact of the agreement to be realized in its fourth quarter 2019 earnings. The company anticipates accounting for substantially all of the compensation as a reduction in cost basis of grounded MAX aircraft and certain future MAX aircraft deliveries.
  • Revenue - The company expects its fourth quarter total revenue per available seat mile (TRASM) to be flat to up approximately 1% year-over-year versus its previous guidance of flat to up 2%. The change in midpoint from previous guidance is due primarily to lower than planned yields in the pre-Thanksgiving period and higher completion factor throughout the quarter. Demand remains strong and December revenue performance exceeded the company's expectations.
  • Special items - The company expects its total pre-tax net special items in the fourth quarter will be approximately $110 million1, of which approximately $20 million is non-cash. Net special items primarily consist of fleet restructuring costs and merger integration expenses, offset in part by the mark-to-market adjustments on equity and other investments.
  • CASM - The company now expects its fourth quarter total cost per available seat mile (CASM) excluding fuel and net special items to be up approximately 1% to 3%1 year-over-year versus its previous guidance of up 2% to 4%. The change versus previous guidance is due primarily to improved operational performance and higher completion factor.
  • Pre-tax margin - The company continues to expect its fourth quarter pre-tax margin excluding net special items to be approximately 5% to 7%1.
  • Liquidity - As of December 31, 2019, the company had approximately $7.0 billion in total available liquidity. Due to the uncertainty of the return to service of the 737 MAX aircraft, the company arranged an additional revolving line of credit to provide it with incremental borrowing capacity of up to $400 million. The company has no present intention to borrow any amounts under this facility, which matures in September 2020 with an optional extension to December 2020. The company's total liquidity is comprised of unrestricted cash and investments of $3.8 billion and $3.2 billion in undrawn revolver capacity. The company also had a restricted cash position of $158 million.
  • Shares outstanding - The fully diluted weighted average sharecount for the fourth quarter was approximately 436 million.
  • Capex - Gross aircraft capex and net PDPs for the fourth quarter are lower than previous guidance due primarily to the delivery dates of certain MAX aircraft moving from the fourth quarter to 2020.

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This press release was sourced from American Airlines on 10-Jan-2020.